In early 2013, India's then comptroller and auditor general (CAG), Vinod Rai, while delivering a speech at Harvard University's Kennedy School, wondered whether his office should be confined to being “mere accountants.” That this question could be raised in a public forum, and that too outside India, spoke to the transformation in recent times of Rai's stature and the office that he held. The winds of change were reflected in the Indian Supreme Court's rejection in 2013 of a public interest litigation challenging the authority of the auditor general, who is a constitutional authority, to conduct performance audits of the government. Significantly, the Court ruled, the “CAG is not a munim [accountant] to go into the balance-sheets. The CAG is a constitutional authority entitled to review and conduct performance audit on revenue allocations . . . and examine matters relating to the economy and how the government uses its resources.”Footnote 1
For most of its 150-year-plus existence, the auditor general's office has been a scrupulous but relatively unglamorous bookkeeping institution. This is best illustrated by a story told by John Masters, an officer in the British Army in India in the 1930s and 1940s and author of several books.Footnote 2 In the 1940s, a young lieutenant in Multan (in present-day Pakistan) apparently eloped with an Anglo-Indian woman, taking with him money from the regimental coffers. His superior, a major, followed him by train and then took a taxi to track down the love-struck lieutenant in Lahore and recover whatever was left of the stolen money. When the major claimed reimbursement for his transport costs, however, his claim was rejected by the auditor general's office on the grounds that he should have used his horse, provided by the Army, and not incurred wasteful expenditure.
One of the architects of the Indian Constitution and independent India's first law minister, B. R. Ambedkar, had no doubts about the importance of the auditor general's office. Speaking about the office, Ambedkar said during the Constituent Assembly (1946–49) debates, “This dignitary or officer is probably the most important officer in the Constitution of India . . . and his duties . . . are far more important than the duties even of the judiciary—he should have been certainly as independent as the Judiciary.”Footnote 3 Until recently the auditor general's office had done little to match up to Ambedkar's vision. From 2010 onwards, however, the office has been the talking point of the country, with Rai being the subject of cover stories, regularly appearing on television, and even being chosen as “Person of the Year” in 2011 by Forbes magazine. In their report on the allotment of telecom licenses (2010), or what is commonly known in India as the 2G spectrum scam, the two reports on the 2010 Commonwealth Games (2009 and 2011) held in New Delhi, and most recently their report on the allocation of coal fields (2012), Rai and his team unearthed irregularities and graft in government projects and policies that left the Congress Party-led coalition government acutely embarrassed and provided considerable ammunition to the opposition.
In this essay I explain why and how the office of the auditor general, which has been a relatively low-key bookkeeping institution for most of its career, has suddenly shot to prominence. By looking at the auditor general's past record and its constitutional remit, I suggest that the revelations in the reports were just one reason for their impact. The way the recent reports were presented and their timing contributed equally to the ripples they created. I also suggest that the auditor general's office, much like the Supreme Court and the Election Commission, might play a greater role in Indian democracy in the future. But as with the other two institutions, we should be wary of burdening it with expectations beyond its remit.
Why the Fuss Now
While the auditor general's office churns out reports by the dozen every year—many of which sink without a trace—at least the four above-mentioned recent reports have had a cataclysmic effect. The contents of the reports had a lot to do with their impact. Possibly the most explosive was the audit report on the “Issue of Licences and Allocation of 2G Spectrum.”Footnote 4 It examined 122 2G spectrum licenses issued by the federal department of telecommunications in 2008, finding several irregularities in the allocation process, which was done under a “first come, first served” policy. Among these were the following: the licenses were issued at 2001 prices; the views and recommendations of the Telecom Regulatory Authority of India, the Finance Ministry, the Ministry of Law and Justice, and even the Prime Minister's Office on how the spectrum should be priced and sold were ignored; the rules of the allocation process, which included a one-hour window on January 10, 2008, for licensees to apply, were changed arbitrarily and lacked transparency; and licenses were issued to ineligible applicants. The most damning indictment of the licensing process was, however, the “presumptive loss” to the exchequer on the spectrum allocation. The value of the loss was pegged at a staggering Rs 1.76 trillion (US$40 billion).Footnote 5
The audit report on “Allocation of Coal Blocks and Augmentation of Coal Production,” too, focused on the allocation of a scarce resource.Footnote 6 The main objection was to the way in which 142 coal blocks from 2004 onwards were allocated by the Ministry of Coal. According to the report, the ministry's screening committee did not operate in a transparent manner and disregarded the suggestion that the coal blocks be allocated through a process of “competitive bidding.” The similarity with the report on the 2G spectrum allocation did not end there. It put a figure to the estimated “financial gains” accruing to the private players who won bids for the coal blocks, pegging it at Rs 1.86 trillion (US$33 billion).
How were these figures, both mindboggling and controversial, arrived at? In the 2G spectrum case, the auditor general made its calculations on the basis of the prices at which the 3G spectrum was auctioned in 2010, bringing a windfall gain of around Rs 677.19 billion (US$14.6 billion) to the government, and the value of the stakes sold by the new licensees to foreign investors. There was no similar benchmark for the coal allocation report, so the CAG used the average cost of production and the average sale price of open cast mines of the government-owned entity, Coal India Limited, in 2010–11.
The reports on the 2010 Commonwealth Games were somewhat different from the other two reports in that they documented irregularities and inefficiencies in the staging of what was the biggest multi-sport event held in India. The first report, published in 2009 during the run-up to the Games, reported a lack of coordination among different agencies, serious delays in project implementation, and a considerable increase in the costs of hosting the Games from what was originally budgeted.Footnote 7 The second report, an audit of the Games after they were held, was published in 2011.Footnote 8 One of its primary findings of the report was the continual ramping up of the budget of the Games from Rs 12 billion (US$266.7 million), mentioned in the initial bid, to approximately Rs 185 billion (US$4.1 billion). The reasons for the cost inflation, according to the report, were a “piecemeal” approach to the organization of the Games and “delays at different stages.” Besides, it found that the hiring of contractors and consultants and the award of tenders in many instances was “arbitrary and ad hoc.”
There were three broad reasons for the reports having a much greater impact than usual. First, they stood out because of the scale of the graft, particularly in the allocation of the 2G spectrum and the coal fields, that they professed to expose. Most importantly, they put a precise figure to the loss incurred by the exchequer, estimated to run into several billion rupees. Both the scale and the quantification of the corruption made it an irresistible story for the media. Unlike an earlier period when newspapers dominated, the Indian media landscape is much more varied, with some 150-odd television channels dedicated to covering news both in English and Indian languages, and a vibrant social media. Unsurprisingly, the media is ready—often going to absurd lengths—to run with a controversial story. This made it easier for the opposition and civil society to put the government on the mat. Two days before he stepped down as auditor general in May 2013, Rai admitted in an interview that one of the factors that had worked in his favor was the “media, the 24x7 channels.”Footnote 9
Second, the audit reports were released at a time when the issue of corruption was a talking point in India for various reasons. During the run-up to the Commonwealth Games, the public perception, fueled by media reports, was that the preparation for the Games was riddled with graft. However, it was the activist and self-professed Gandhian from the western Indian state of Maharashtra, Anna Hazare, and his followers who ensured that corruption would figure as one of the top issues on the government's agenda. In April 2011, Hazare hit the national headlines when he went on a hunger strike in central Delhi, demanding a Lokpal or a strong anti-corruption ombudsman.Footnote 10 A few months later in August, Hazare again went on a thirteen-day hunger strike in Delhi to protest government inaction on the Lokpal legislation. Hazare's agitation drew considerable support across India and was widely covered by the Indian and international media. The audit reports, particularly the one on the 2G spectrum, were highlighted by Hazare and his supporters and helped fuel the anti-corruption movement.
Third, in its reports on telecom and coal, the auditor general went beyond merely auditing and into the realm of policy advice. Explicit in the audit reports was a prescription that auctions were the best way to allot scarce resources. For the spectrum, by the time the report was published in 2010, auctions had already been adopted by the government. However, for coal, the CAG in its report recommended that, in order to bring “objectivity” and “transparency” in the allocation of coal fields, the coal ministry should “urgently work out the modalities to implement the procedure of allocation of coal blocks for captive mining through competitive bidding.”Footnote 11 The new thrust of the auditor general was articulated by Rai in his talk at Harvard where he said that his office was “as much engaged in the business of upgrading governance as any other agency in the administration.”Footnote 12 Political analyst Pratap Bhanu Mehta has pointed out that, despite possible mistakes in the auditor general's calculations, the recent audit reports shifted the “focus of accountability from merely expenditure to a framework of justifications.” He has argued that the reports pushed forward the idea that government policies must meet the “test of public reason.”Footnote 13 Whether this is within the constitutional remit of the auditor general's office is open to interpretation, but that it, like the Supreme Court, is able to do so is because the reputation of India's elected representatives and Parliament has reached an all-time low. Recent surveys, as well as agitations like the one led by Hazare, are testimony to the deep disenchantment with the political class. This has allowed the Court and now the auditor general not only to enter into areas that would normally have been in the legislative and executive domain, but also to win praise from the ever-expanding Indian middle class.
The Impact of the Reports
The effect of the reports has by any standards been spectacular and none more so than the one on 2G spectrum allocation. Following the 2G report, the telecom minister, Andhimuthu Raja (a lower-caste member of Parliament from Tamil Nadu's Dravida Munnetra Kazagham, at the time a constituent party of the federal governing coalition), under whose watch the spectrum allocation was made in 2008, resigned in November 2010. Subsequently the issue was taken to court, resulting in the arrest and several months in judicial custody for Raja as well as a former telecom secretary before Raja was released on bail in May 2012. Raja and fifteen others were expected to be tried in 2013. The opposition parties, led by the Bharatiya Janata Party (BJP), took up the issue in earnest and derailed an entire session of Parliament in the winter of 2010, demanding a joint parliamentary probe into the scam. The demand was eventually conceded, making it only the fourth time that such a request was granted. Finally, the Supreme Court in February 2012 struck down the allotment of 122 telecom licenses and ruled that natural resources should be sold to private players only through auction. (This was later revised in September 2012 by a Constitution Bench of the Supreme Court, which said that auction, despite being “preferable” for allotment of natural resources, was not a constitutional requirement. The Court did not, however, revisit its decision on the 2G spectrum.) Besides the catastrophic impact of the auditor general's report on the government, it had another unexpected spin-off. It provided fodder for the most serious anti-corruption movement in India in recent times, led by Hazare from 2011 onwards.
The two reports on the Commonwealth Games indirectly resulted in the rolling of heads, most notably of influential Congress MP and chairman of the Games organizing committee, Suresh Kalmadi. Kalmadi and several of his aides were arrested in April 2011 and remained in custody until January 2012. The latest in the series of explosive reports questioned the methods of allocating coal fields, many of them to private companies, between 2004 and 2009. It caused a furor, and even as the government was conducting a review of the allocations, the Indian Parliament was nearly brought to a standstill in 2012 amid calls for the resignation of Prime Minister Manmohan Singh, who had held the coal portfolio during the period when the coal fields were allotted.
The Institution
Much of the power of the auditor general stems from its position as an independent, constitutional authority. It was originally designated as the Accountant General to the Government of India, and two critical features of the institution, as stipulated in the 1935 Government of India Act, were retained in independent India: the accountant general could be removed from office “in like manner and on like grounds as a judge of the Federal Court,” and on vacating office he or she was barred from holding any office under the Crown in India. Articles 148, 149, 150, and 151 of the Indian Constitution, which define the structure of the auditor general in independent India, have similar provisions to ensure his or her autonomy. Interestingly, the Constitution inserted “comptroller” before “auditor general,” giving the post a weighty, but also archaic, ring to it. Indeed, as far back as 1916, the New York Times in an editorial railed against the word “comptroller,” which it felt should rightly be “controller,” still in use in the United States and the United Kingdom, and called for it to be banished.Footnote 14
Article 148(1) of the Indian Constitution states that the auditor general “shall only be removed from office in like manner and on the like grounds as a Judge of the Supreme Court.” Article 148(4) says that the auditor general shall not be eligible for further office in the government “after he has ceased to hold his office.” In addition, Article 151 stipulates that the audit reports relating to federal accounts must be laid before both Houses of Parliament and the reports relating to accounts of states before state legislatures. The importance attached to the institution was apparent during the Constituent Assembly debates. Ambedkar was, however, unhappy with the fact that the staff of the auditor general's office were to be appointed by the executive—the very institution it was expected to audit—which he termed an “incongruity.”Footnote 15 What independent India ended up with was an auditor general that was “neither legislative nor purely executive,”Footnote 16 but an independent federal authority that served both branches of government. Since the appointment of the auditor general has, however, been the prerogative of the executive, the quality of the incumbent has varied. The first four audit chiefs were from the Indian Audit and Account Service; the last seven incumbents from 1978 onward, including Rai, who held the position from 2008 to 2013, have been from the Indian Administrative Service with no particular expertise in auditing. This has raised questions about whether the right person is being appointed to the auditor general's post and given rise to demands to change the selection procedure.
The situation is quite different with the supreme audit institutions of other countries. In the United Kingdom, until 1983 the auditor general reported to Parliament, but was under the administrative authority of the executive. Under the National Audit Act of 1983, the auditor general formally became an officer of the House of Commons. Some Commonwealth countries, such as Australia and New Zealand, follow the amended British model. Many Asian countries, including Japan, South Korea, and Thailand, follow a similar system where the legislature ratifies the appointment of the head of the supreme audit institution. In the United States, the Government Accountability Office has always worked for the U.S. Congress, and the comptroller general is chosen from a list provided by the Congress.
In India, it took two decades from the formal ratification of the Constitution in 1950 to codify the precise role of the auditor general under the Comptroller and Auditor-General (Duties, Powers and Conditions of Service) Act, 1971. The Act clearly spelled out the authority of the auditor general's office to audit all receipts and expenditures of the federal and state governments, giving the auditor general the power to inspect the accounts of any government office or agency as well as making it compulsory for government agencies to provide any information required of them.
To carry out its wide-ranging mandate, the auditor general's office has always had a fairly substantial staff strength. In 1948, the Indian Audit and Accounts Department, the organization that the auditor general heads, had 15,600 staff members.Footnote 17 By 1990, this had increased to 60,532.Footnote 18 However, the numbers have steadily declined since, primarily due to increasing computerization, with the auditor general's office having a current staff strength of nearly 46,000 spread over 136 offices and an annual budget of Rs 28.04 billion (US$443.6 million) for 2013–14.Footnote 19 Even taking into account the size of India's government, these are significant numbers. By way of contrast, the U.K. National Audit Office employed 860 peopleFootnote 20 at a net cost of 67.8 million pounds (US$108.5 million) for 2011–12Footnote 21 and the U.S. Government Accountability Office employed 2,957 people in eleven offices with a budget of US$533.6 million for the 2012 fiscal year.Footnote 22
The Record
Given its remit and its autonomy, the auditor general's office has, however, not played as significant a role as one would have expected. One of the reasons is that it has no legal powers to act against government officials or departments that have violated rules. It can only point out the violations, after which it is the responsibility of the government to table the reports for which there are no deadlines. Indeed, a consultation paper by the National Commission to Review the Working of the Constitution recommended in 2011 that the CAG be given “quasi-judicial” functions along the lines of those enjoyed by audit institutions in countries like Japan, France, and South Korea.Footnote 23 Besides, the two parliamentary financial committees designated to examine audit reports—the Public Accounts Committee and the Committee on Public Undertakings—have rarely looked at the reports in any detail, let alone acted on them. In 2010–11, for instance, the two parliamentary committees discussed only twenty-nine paragraphs from the forty-two audit reports on the federal government prepared during this period. The numbers have not been much better in previous years.
Prior to the recent reports, though, there have been a few instances in the past where audit reports have had an impact. One was the audit report in 1989 on the now-infamous Bofors scam, revolving around the procurement of arms from a Swedish firm, which shook the Congress government headed by Prime Minister Rajiv Gandhi.Footnote 24 At the time, the opposition resigned en masse following the tabling of the report in Parliament. Another report that had a significant impact was an audit of the Bihar government in 1995–96, which found that the state's animal husbandry department was spending much more than its sanctioned budget. Between 1993 and 1996, in six districts, the department drew around Rs 2.79 billion (US$81.8 million) from the state treasury against an approved sum of Rs 105 million (US$3 million).Footnote 25 The then chief minister of Bihar, Lalu Yadav, along with a host of high functionaries, was implicated in what was termed the “fodder scam” by the media. Considering the nature of the charges and the people involved, India's federal crime investigator, the Central Bureau of Investigation, took over investigations in 1996 and filed a chargesheet against Yadav and fifty-five others in 1997. The same year, Yadav resigned as chief minister (installing his wife Rabri Devi in the chief minister's chair) and was also held in judicial custody. Since then the investigative and judicial process has dragged on, with Yadav being remanded on several occasions. Even as a special court continues to hear this case, sixteen years after the charges were first framed, Yadav continues to be a prominent political figure.
Yet another audit report that had a considerable impact was on the procurement of items during the 1999 Kargil war with Pakistan, officially known as Operation Vijay.Footnote 26 The report, presented to Parliament in 2001, found several faults with the procurement system of the defense forces. One of the findings was that a sizeable amount of supplies was received after the war had ended, with supplies worth Rs 17.62 billion (US$378.1 million) being shipped six months after the cessation of hostilities. It also found that equipment and supplies worth Rs 2.61 billion (US$55.8 million) did not meet quality standards. The report caused an uproar in Parliament and was covered extensively by the media, which focused particularly on the emotive issue of irregularities in the contract for procuring coffins and body bags for soldiers. Following the audit, defense procurement procedures were revamped and some of the guilty officers punished. There are many, however, who are yet to face trial. The lack of action on the report prompted the Supreme Court to observe on a public interest litigation on the Kargil purchases, a decade after the CAG report was published, “Most of the time, CAG reports are not given their due. The [defense] department attaches no value to the institution but the Constitution gives the CAG a position of primacy.”Footnote 27
A Third Force?
While the auditor general's accounting and prescriptions have been used to beat the government, they have not gone uncontested either. The government, led by Kapil Sibal, a high-profile lawyer who was appointed the telecom minister after Raja resigned, has consistently argued that the 2G spectrum report was flawed. If the government's defense on spectrum had few takers, including in the Supreme Court, the report on coal allocation has been much more widely questioned. One of the criticisms was that the auditor general erred in calculating the loss based on 2010–11 prices, though the allocations were made in 2006, resulting in considerable inflation in the loss figure. Yet another criticism was that the report failed to discount future profits.
There are admittedly problems in the methodology of calculating presumptive losses. This is under scrutiny not just by experts and the media but also by the Public Accounts Committee of Parliament. However, the greater good done by the audit reports has outweighed their faults. The interventions have come at a time when corruption has been at the top of the national agenda. Arguably Rai and his team have been prime movers in pushing corruption into public focus. Without their reports, anti-corruption agitations like the one led by Hazare might not have taken off in the way they did. At the same time, without civil society groups stridently taking up the issues raised by the auditor general's office, their reports would not have got the mileage that they did. The auditor general's prominence could be seen as a third coming for India's institutions after the Supreme Court, which laid claim to being the final authority on constitutional matters in the 1970s, and the Election Commission, which, beginning with chief election commissioner T. N. Seshan's tenure in the 1990s, started wielding its authority much more effectively than before. Both the Court and the election panel possess enormous powers and far greater legitimacy in the eyes of the people when compared to elected representatives. A prominent retired bureaucrat has recently suggested that under the Indian Constitution there are five organs of state.Footnote 28 In addition to the executive, legislature, and judiciary he adds the Election Commission and the auditor general. This is in line with Bruce Ackerman's argument for a model of “constrained parliamentarianism,” where a host of “special-purpose branches” check and balance the elected house, over American-style separation of powers.Footnote 29 In India, however, the auditor general's office, despite its occasional interventions, has never really been in the same league as the Supreme Court or the Election Commission. In the words of a legal scholar, it is “independent but inferior.”Footnote 30 This is partly because, unlike the Court or the election panel, the auditor general does not have the same kind of legal powers to enforce. It can only audit and prepare reports, which must be placed before Parliament and eventually appear in the public domain.
The Indian media has portrayed Rai as doing a “Seshan” by not only giving more teeth to a moribund organization, but also having grown bigger than the outfit he headed. The government insinuated that Rai was following in the footsteps of a predecessor, T. N. Chaturvedi (1984–90), who, after retiring as auditor general, contested elections on a BJP ticket and was elected to Parliament. What is undeniable, however, is that the person occupying the auditor general's chair is critical to the profile of the audit body. If, as Rai himself pointed out, he had not held press conferences on some of the more explosive reports, they might have gathered dust.Footnote 31 Indeed, there were misgivings that the government might choose someone “bland and ignorable”Footnote 32 to be the next audit chief after Rai's retirement on May 22, 2013. This was accompanied by calls for the selection to be made by a broad-based selection committee to replace the current procedure, where some names are suggested from within the government to the prime minister, who then recommends a name to the president of India. It is the president who formally appoints the auditor general.Footnote 33 Some of the misgivings about the direction of the auditor general's office following the departure of Rai have not been unfounded, with the agency maintaining a relatively lower profile under the new auditor general, former defense secretary Shashi Kant Sharma.
Though the recent audit reports provided momentum to anti-corruption protesters like Hazare and his followers, they also illustrated the need to question the ultimate objective of the protests—an all-powerful, anti-corruption ombudsman. The impact of the reports seems to suggest that if the various government agencies and constitutional authorities, which are meant to ensure accountability, do their job there is no need for yet another Leviathan-like Lokpal.Footnote 34 The reports, which have resulted in high functionaries being put on trial, are a reminder that there are institutions and mechanisms within government that can identify wrongdoing and set in motion a process to punish those responsible for it. The auditor general is one among several institutions, which include the Central Bureau of Investigation and the Central Vigilance Commission, to identify and tackle corruption. The real difference, however, between the other anti-corruption agencies and the auditor general's office is that the latter is a constitutional authority and relatively less prone to government pressure. In fact, Rai has made the point that both the Central Bureau of Investigation and the Central Vigilance Commission are “handmaids” of the government and for them to be really effective they need be made constitutional bodies.Footnote 35
At the same time, we must guard against the rhetoric that the auditor general's reports are part of a “great cleansing act” in India.Footnote 36 The scale of corruption—inflated or otherwise—unearthed by the auditor general in its recent reports is very much about graft in high places, done by high functionaries in government. It says little about the endemic, daily corruption—what James Scott calls “retail corruption”Footnote 37—that bedevils India and hurts the middle class and the poor the most. Indeed, the audit reports and their reception might have had the perverse effect of further inuring people to petty corruption that does not measure up to the grand scale of a telecom or a coal scam. That is of course not the fault of the auditor general, but it does point to the limits of the auditor general's office as an institution to tackle corruption.
